UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 14, 2016
| INTRICON CORPORATION | |||
| (Exact name of registrant as specified in its charter) | |||
| Pennsylvania | 1-5005 | 23-1069060 | |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
| 1260 Red Fox Road, Arden Hills, MN 55112 | |||
| (Address of principal executive offices) (Zip Code) | |||
| Registrant’s telephone number, including area code (651) 636-9770 | |||
| N/A | |||
| (Former name or former address, if changed since last report) | |||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
The following information is being provided pursuant to Item 2.02. Such information, including Exhibit 99.1 attached hereto, should not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
On November 14, 2016, IntriCon Corporation (the “Company”) announced earnings for the quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On November 14, 2016, Company announced that it acquired a 20 percent stake in Hearing Help Express. A copy of the press release is furnished as Exhibit 99.2 and is incorporated herein by reference.
The information contained under Item 2.02 is incorporated herein by reference.
The information provided under Item 2.02 and Item 7.01, including Exhibits 99.1 and 99.2 attached hereto, should not be deemed “filed” for purposes of Section 18 of the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits. |
|
Exhibit No. |
Description |
| 99.1 | Press Release dated November 14, 2016 (financial earnings). |
| 99.2 | Press Release dated November 14, 2016 (Hearing Help Express). |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INTRICON CORPORATION | ||
| By: |
/s/ Scott Longval | |
| Name: | Scott Longval | |
| Title: | Chief Financial Officer |
Date: November 14, 2016
S-1
Exhibit Index
|
Exhibit No. |
Description |
| 99.1 | Press Release dated November 14, 2016 (financial earnings). |
| 99.2 | Press Release dated November 14, 2016 (Hearing Help Express). |
E-1
Exhibit 99.1
INTRICON REPORTS 2016 THIRD-QUARTER RESULTS
Hearing Health Revenues Rise
ARDEN HILLS, Minn. — November 14, 2016 — IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced financial results for its third quarter ended September 30, 2016.
Highlights:
Financial Results
For the 2016 third quarter, the company reported net sales of $16.0 million, compared to $17.3 million in the prior-year period. IntriCon posted a net loss attributable to shareholders of ($1,304,000), or ($0.19) per share, versus net income attributable to shareholders of $628,000, or $0.10 per diluted share, for the 2015 third quarter.
“Third-quarter results reflect the continued timing shift in orders from our largest medical customer,” said Mark S. Gorder, president and chief executive officer of IntriCon. “Despite this challenge, we were able to deliver year-over-year gains in hearing health and professional audio. And we anticipate medical revenues will begin to rebound in our fourth quarter.”
Gross profit margins were 22.9 percent compared to 26.7 percent in the prior-year third quarter. The decrease was primarily due to a less favorable sales mix and slightly lower revenue.
Operating expenses for the third-quarter were $4.7 million, compared to $3.9 million in the prior-year third quarter. The increase was largely due to the inclusion of PC Werth, acquired by IntriCon UK in November 2015. Sequentially, IntriCon decreased operating expenses $343,000, in response to temporarily lower revenue levels.
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IntriCon Corporation 2016 Third-Quarter Results
November 14, 2016
Page 2
Business Update
Hearing health sales increased 7 percent from the prior-year third quarter, primarily stemming from contributions by PC Werth, acquired by IntriCon UK to build a hearing health platform in England. During the quarter, IntriCon experienced gains in value hearing aids, personal sound amplifier products (PSAP) and assisted listening devices. The company remains intently focused on opportunities in value hearing health versus the declining conventional channel.
“Within hearing health, there’s a groundswell building for fundamental change among regulators and consumers,” said Gorder. “As a company, we are steadfast in our commitment to overcome barriers to device access and spur development and innovation. This is why—despite lower revenue levels—we maintained our level of investment in mission critical ultra-low-power wireless and DSP technologies during the quarter. These technologies are required to support our emerging alternative channels and our goal of delivering superior outcomes-based, affordable hearing healthcare, by combining state-of-the-art devices and software technology at a much lower cost directly to consumers.”
The company is focused on driving growth and creating efficiencies in its current value-based hearing healthcare initiatives. Domestically, IntriCon continues its work with earVenture, a joint venture with the Academy of Doctors of Audiology (ADA). Over 450 ADA members have registered to join the earVenture program. earVenture is implementing sales and marketing efforts to convert those members into consistent customers, as well as soliciting non-registered ADA members to join.
In the United Kingdom, IntriCon has delivered initial devices to targeted National Health Service (NHS) clinics, with positive feedback. In addition, IntriCon currently working with the NHS for approval of a third device, the K940D, which will enhance IntriCon sales capabilities. The K940D, which is a traditional behind-the-ear device, is very appealing to the NHS because of its broad fitting range and advanced features. Approval of the K940D is anticipated in early 2017.
“With the ADA and NHS, our efforts have centered on educating the practitioner—an effort we believe will drive growth,” said Gorder. “Moreover, we made meaningful progress during the quarter pursuing alternative distribution models and partnerships within the value hearing health market. And as we announced today, we acquired partial ownership of Hearing Help Express, a direct-to-consumer hearing aid provider.”
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IntriCon Corporation 2016 Third-Quarter Results
November 14, 2016
Page 3
Sales in IntriCon’s medical business decreased 17 percent in the 2016 third quarter, primarily driven by IntriCon’s largest customer, Medtronic. The lower sales to Medtronic were expected as they manage the transition of their recently FDA-approved MiniMed 630G system. IntriCon expects Medtronic sales to begin ramping up in the fourth quarter as they launch the MiniMed 630G system.
Long term, the company believes it’s well-positioned for growth with Medtronic. In addition to the MiniMed 630G system, IntriCon is also designed into the MiniMed 670G system which was also recently approved by the FDA, and is scheduled to be launched in the spring of 2017. “The MiniMed 670G is the world’s first hybrid closed loop insulin delivery system,” said Gorder, “and we are excited to be designed into and supporting such a revolutionary diabetes management system.”
Third-quarter 2016 professional audio communication sales rose by 13 percent from the prior-year period. IntriCon anticipates fourth quarter of 2016 revenue in this business to be flat with the prior-year comparable period.
As disclosed in the second quarter, given temporarily lower revenue levels, IntriCon has taken measured actions to reduce operating expenses. These reductions, while not impacting the company’s ability to execute strategic initiatives, should result in approximately $600,000 in annual savings—the majority of which will begin to be realized in the 2016 fourth quarter.
Looking Ahead
Concluded Gorder, “Although our third-quarter performance reflects a customer product transition outside of our control, this is not where we want it to be—or where we know we can be. We remain confident in the long-term prospects of our medical business and look forward to the expected fourth-quarter ramp of Medtronic’s sales. Equally important, we remain encouraged by our technology pipeline and the growing appetite for an alternative hearing health channel. Based on information currently available, we anticipate fourth-quarter net sales to increase approximately $1 million from the 2016 third quarter and near break-even from a profitability prospective, with notably stronger results in the first quarter of 2017.”
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IntriCon Corporation 2016 Third-Quarter Results
November 14, 2016
Page 4
Conference Call Today
As previously announced, the company will hold an investment community conference call today, Monday, November 14, 2016, beginning at 4 p.m. CT. Mark Gorder, president and chief executive officer, and Scott Longval, chief financial officer, will review third-quarter performance and discuss the company’s strategies. To join the conference call, dial: 1-888-715-1401 and provide the conference ID number 5036157 to the operator. To access the replay, dial 1-888-203-1112 and enter passcode 5036157.
About IntriCon Corporation
Headquartered in Arden Hills, Minn., IntriCon Corporation designs, develops and manufactures miniature and micro-miniature body-worn
devices. These advanced products help medical, healthcare and professional communications companies meet the rising demand for
smaller, more intelligent and better connected devices. IntriCon has facilities in the United States, Asia, the United Kingdom
and Europe. The company’s common stock trades under the symbol “IIN” on the NASDAQ Global Market. For more information
about IntriCon, visit www.intricon.com.
Forward-Looking Statements
Statements made in this release and in IntriCon’s other public filings and releases that are not historical facts or that include forward-looking terminology are “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be affected by known and unknown risks, uncertainties and other factors that are beyond IntriCon’s control, and may cause IntriCon’s actual results, performance or achievements to differ materially from the results, performance and achievements expressed or implied in the forward-looking statements. These risks, uncertainties and other factors are detailed from time to time in the company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2015. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise.
Contacts
| At IntriCon: | At PadillaCRT: |
| Scott Longval, CFO | Matt Sullivan |
| 651-604-9526 | 612-455-1709 |
| slongval@intricon.com | matt.sullivan@padillacrt.com |
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IntriCon Corporation 2016 Third-Quarter Results
November 14, 2016
Page 5
INTRICON CORPORATION
Consolidated Condensed Statement of Operations
(In Thousands, Except Per Share Amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| — | ||||||||||||||||
| Sales, net | $ | 16,012 | $ | 17,341 | $ | 51,246 | $ | 51,063 | ||||||||
| Cost of sales | 12,347 | 12,706 | 38,597 | 37,515 | ||||||||||||
| Gross profit | 3,665 | 4,635 | 12,649 | 13,548 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 1,082 | 854 | 3,478 | 2,739 | ||||||||||||
| General and administrative | 2,250 | 1,708 | 6,649 | 5,150 | ||||||||||||
| Research and development | 1,323 | 1,344 | 4,297 | 3,864 | ||||||||||||
| Restructuring charges | — | — | 132 | — | ||||||||||||
| Total operating expenses | 4,655 | 3,906 | 14,556 | 11,753 | ||||||||||||
| Operating income (loss) | (990 | ) | 729 | (1,907 | ) | 1,795 | ||||||||||
| Interest expense | (135 | ) | (95 | ) | (387 | ) | (287 | ) | ||||||||
| Other income (expense) | (181 | ) | (131 | ) | (472 | ) | 17 | |||||||||
| Income (loss) before income taxes | (1,306 | ) | 503 | (2,766 | ) | 1,525 | ||||||||||
| Income tax expense (benefit) | 33 | (125 | ) | 119 | 107 | |||||||||||
| Net income (loss) | (1,339 | ) | 628 | (2,885 | ) | 1,418 | ||||||||||
| Less: Loss allocated to non-controlling interest | (35 | ) | — | (106 | ) | — | ||||||||||
| Net income (loss) attributable to IntriCon shareholders | $ | (1,304 | ) | $ | 628 | $ | (2,779 | ) | $ | 1,418 | ||||||
| Net income (loss) per share attributable to IntriCon shareholders: | ||||||||||||||||
| Basic | $ | (0.19 | ) | $ | 0.11 | $ | (0.44 | ) | $ | 0.24 | ||||||
| Diluted | (0.19 | ) | 0.10 | (0.44 | ) | 0.23 | ||||||||||
| Average shares outstanding: | ||||||||||||||||
| Basic | 6,796 | 5,943 | 6,287 | 5,873 | ||||||||||||
| Diluted | 6,796 | 6,271 | 6,287 | 6,214 | ||||||||||||
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IntriCon Corporation 2016 Third-Quarter Results
November 14, 2016
Page 6
INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| (Unaudited) | ||||||||
| Current assets: | ||||||||
| Cash | $ | 604 | $ | 369 | ||||
| Restricted cash | 633 | 610 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $67 at September 30, 2016 and $135 at December 31, 2015 | 6,324 | 8,578 | ||||||
| Inventories | 13,329 | 14,472 | ||||||
| Other current assets | 638 | 860 | ||||||
| Total current assets | 21,528 | 24,889 | ||||||
| Machinery and equipment | 39,959 | 38,653 | ||||||
| Less: Accumulated depreciation | 33,103 | 31,911 | ||||||
| Net machinery and equipment | 6,856 | 6,742 | ||||||
| Goodwill | 9,551 | 9,551 | ||||||
| Investment in partnerships | 212 | 224 | ||||||
| Other assets, net | 1,161 | 480 | ||||||
| Total assets | $ | 39,308 | $ | 41,886 | ||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt | $ | 2,002 | $ | 1,908 | ||||
| Accounts payable | 5,966 | 7,785 | ||||||
| Accrued salaries, wages and commissions | 2,207 | 2,559 | ||||||
| Deferred gain | — | 55 | ||||||
| Other accrued liabilities | 725 | 1,279 | ||||||
| Total current liabilities | 10,900 | 13,586 | ||||||
| Long-term debt, less current maturities | 6,862 | 7,929 | ||||||
| Other postretirement benefit obligations | 508 | 542 | ||||||
| Accrued pension liabilities | 790 | 812 | ||||||
| Other long-term liabilities | 127 | 120 | ||||||
| Total liabilities | 19,187 | 22,989 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, $1.00 par value per share; 20,000 shares authorized; 6,801 and 5,981 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively |
6,801 | 5,981 | ||||||
| Additional paid-in capital | 21,168 | 17,721 | ||||||
| Accumulated deficit | (6,825 | ) | (4,046 | ) | ||||
| Accumulated other comprehensive loss | (879 | ) | (721 | ) | ||||
| Total shareholders' equity | 20,265 | 18,935 | ||||||
| Non-controlling interest | (144 | ) | (38 | ) | ||||
| Total equity | 20,121 | 18,897 | ||||||
| Total liabilities and equity | $ | 39,308 | $ | 41,886 | ||||
# # #
Exhibit 99.2
FOR IMMEDIATE RELEASE
INTRICON ACQUIRES STAKE IN HEARING HELP EXPRESS
Direct-to-Consumer Hearing Aid Provider
Accelerates Company’s
Value Based Hearing Healthcare Initiative
ARDEN HILLS, Minn. — November 14, 2016 — IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced that it has acquired a 20-percent stake in DeKalb, Ill., -based Hearing Help Express, a direct-to-consumer mail order hearing aid provider. IntriCon expects to exercise its option to acquire the remaining 80 percent of Hearing Help Express before the end of the year. Terms of the transaction, assuming exercise of the option, include approximately $1.3 million in cash, guaranty of a $2 million note and an earn-out.
“Untreated hearing loss in the United States is a substantial problem, and high device costs have created significant barriers to access for most Americans,” said Mark Gorder, president and chief executive officer of IntriCon. “Hearing Help Express offers a lower-priced alternative for consumers to purchase devices directly—circumventing layers of costs associated with the conventional hearing aid channel.
“Additionally, Hearing Help Express has two decades of experience and a proven track record of excellent customer care. This acquisition gives IntriCon direct access to the emerging value-based hearing healthcare market. It’s a platform we can build on by leveraging our own technically advanced devices and making targeted investments in management, marketing and advertising—and ultimately incorporating an online component.”
Purchasing Hearing Help Express is a key evolution in IntriCon’s value-based hearing healthcare (VBHH) strategy. Over the last decade, the company has invested in the technical and low-cost manufacturing (establishing facilities in Singapore and Indonesia) to design and build superior devices and fitting solutions to address the estimated $1 billion annual value hearing health market. With the addition of Hearing Help Express, IntriCon now has the channel infrastructure to directly reach the consumer and—importantly for millions of consumers—the ability to offer high-quality hearing healthcare at a fraction of the cost.
Said Gorder, “Through our VBHH initiatives and tests, we have formed alliances with other key partners, which have given us experience and key learnings as we move aggressively into a more consumer-facing role. Our Hearing Help Express purchase provides an efficient, established direct-to-consumer channel that we can build on and expand via technology—and one that’s complementary with many of our existing relationships.”
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IntriCon Corporation
November 14, 2016
Page 2
According to Gorder, the company expects that Hearing Help Express and the direct-to-consumer channel will become an increasing contributor to IntriCon’s sales and earnings—and the company will use this opportunity to accelerate its business. Near term, IntriCon is intently focused on the following:
| · | Identifying a vice president candidate to lead Hearing Help Express—a search firm has been engaged and the process is currently under way; |
| · | Once leadership is in place, enhancing Hearing Help Express’ sales and marketing capability, and ramping up advertising—a tactic historically proven to drive sales; and |
| · | Introducing IntriCon’s digital hearing aids and other technical advancements to Hearing Help Express’ customer base—currently Hearing Help Express offers primarily analog products. |
“We’re at a pivotal point in the evolution of the hearing health industry. Fundamental change is needed and we’re excited about the opportunity that we created through thoughtful hard work and planning: a chance to deliver superior outcomes-based affordable hearing healthcare. We’ll accomplish this by combining state-of-the-art devices and software technology at a much lower cost directly to consumers across the country, many of whom have not been able to afford care previously. We expect that capitalizing on this opportunity will lead to both a very bright future for IntriCon and to long-term growth in shareholder value,” concluded Gorder.
About IntriCon Corporation
Headquartered in Arden Hills, Minn., IntriCon Corporation designs, develops, manufactures and distributes miniature and micro-miniature
body-worn devices. These advanced products help medical, healthcare and professional communications companies meet the rising demand
for smaller, more intelligent and better connected devices. IntriCon has facilities in the United States, Asia, the United Kingdom
and Europe. The company’s common stock trades under the symbol “IIN” on the NASDAQ Global Market. For more information
about IntriCon, visit www.intricon.com.
(more)
IntriCon Corporation
November 14, 2016
Page 3
Forward-Looking Statements
Statements made in this release and in IntriCon’s other public filings and releases that are not historical facts or that include forward-looking terminology are “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be affected by known and unknown risks, uncertainties and other factors that are beyond IntriCon’s control, and may cause IntriCon’s actual results, performance or achievements to differ materially from the results, performance and achievements expressed or implied in the forward-looking statements. These risks, uncertainties and other factors are detailed from time to time in the company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2015. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise.
Contacts
| At IntriCon: | At PadillaCRT: |
| Scott Longval, CFO | Matt Sullivan |
| 651-604-9526 | 612-455-1700 |
| slongval@intricon.com | matt.sullivan@padillacrt.com |
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